World News: 19:58 GMT Thursday 6th December 2018. [AM Best via Businesswire via SPi World News]
AM Best has upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” from “a-” of Grupo Nacional Provincial S.A.B. (GNP) (Mexico City, Mexico). The outlook of these Credit Ratings (ratings) has been revised to stable from positive. In addition, AM Best has affirmed the Mexico National Scale Rating of “aaa.MX”. The outlook of this rating remains stable.
The ratings reflect GNP’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
The rating upgrades reflect the continuing improvement in GNP’s risk-adjusted capitalization as a result of the positive bottom line results, as well as changes in accounting derived from the adoption of a Solvency II type framework.
GNP is the largest domestic capital insurer within Mexico based on premiums written. The company operates as a composite insurer of life and non-life business; core business segments include life, health and automobile coverage.
Dividend payments, driven by the company’s targets on capital efficiency, have partially restricted AM Best’s view of GNP’s risk-adjusted capitalization in the past. However, in recent years, GNP’s balance sheet strength, as measured by Best’s Capital Adequacy Ratio (BCAR), is very strong, benefitting from additional equity surplus due to changes in statutory accounting at year-end 2016, and positive bottom-line results during 2016-2017.
The additional equity surplus is a consequence of implementing accounting registers based on market value approximations of assets and liabilities. GNP follows conservative practices in terms of its asset-liability management. In addition, the company’s balance sheet strength is reinforced by its good reinsurance program placed with highly rated counterparties, which adequately protects the company’s risk retention. The effectiveness of these practices was demonstrated by the lack of any material impact on the company’s capital position from the September 2017 earthquakes in central Mexico.
During 2017, GNP reported marginal growth while maintaining profitable business in its core segments. The company adjusted its underwriting policies, resulting in better operating performance metrics in comparison with trends in previous years. As of June 2018, the company continued to post adequate underwriting results, investment yield and profitability.
Positive rating actions could take place if the company is able to maintain its current level of risk-adjusted capitalization while improving its bottom-line results and profitability indicators to levels more in line with highly rated peers. Negative rating actions could take place if the company erodes its additional equity with a sustained negative operating performance, or if the amount of dividends paid negatively impacts risk-adjusted capitalization to a level that is no longer supportive of the current rating levels.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of AM Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Understanding Best’s Credit Ratings.
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Business Wire: 19:58 GMT Thursday 6th December 2018
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